CD certainly is a 'compressed' format. Anything less than the original is introducing some sort of distortion with analog often being considered the least distorting, it is also one of the most difficult and costly ones to implement.
If CD were lossless, then DVD-A/BDA would not offer any improvement. But, because CD doesn't operate at the higher sampling rates there is some level of information that is being lost when put onto the disc. Now, it does maintain that information at a 1:1 level at the given rate, but it doesn't mean that high resolution audio doesn't offer better sound to those who have the equipment to hear the difference.
Now, a well written and carefully applied algorythm I can certainly see doing a good job of 'upconversion'. Much as we see in the video world good with bad video processing, it sounds like what johnfull is talking about is the equivalent of using a good outboard video scaler.
If you use a good outboard video scaler on all of your video material then you take the scaler of the TV and other products out of the equation. If that scaler is near top shelf in quality, then you can maximize your video quality even if a poor video processor exists in other gear simply by bypassing it.
In this case, you take the capability of a cheap CD player out of the equation. The audio format is already getting a high quality makeover. Not as good as a high resolution audio original, but better than the CD original. More importantly, it will consistently play better regardless of the equipment used and the potential poor quality of the digital hardware within them which may (or may not) oversample/upsample the CD itself.
Clearly, not touching the CD original is going to give as good of results as the CD has on it originally. But, if additional sampling is done, and is not applied well, it could bring the CD quality down. Worse, many CD players don't have any adjustments on them at all to correct for this.
Now, it all touches really deep into the black arts of audiophiledelity which I strictly try to avoid. But, for those who want the absolute best from their existing CD collection, I can see how an external audio processor, much like a really good external DAC, can deliver performance improvements and greater audio consistency between different players.
Will it be as good as a HD original? Of course not.